Financial Returns and Efficiency As Seen By An Artificial Technical Analyst
License
Access Rights
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
0165-1889
Issue Date
Type of Publication
Keyword(s)
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
Journal of Economic Dynamics & Control, 2001, 25, 01-feb, 213-244
Cite
SKOURAS, Spyros, Financial Returns and Efficiency As Seen By An Artificial Technical Analyst, Journal of Economic Dynamics & Control, 2001, 25, 01-feb, 213-244 - https://hdl.handle.net/1814/17095
Abstract
We introduce trading rules which are selected by an artificially intelligent agent who learns from experience - an Artificial Technical Analyst. These rules restrict the data-mining concerns associated with the use of 'simple' technical trading rules as model evaluation devices and are good at recognising subtle regularities in return processes. The relationship between the efficiency of financial markets and the efficacy of technical analysis is investigated and it is shown that the Artificial Technical Analyst can be used to provide a quantitative measure of market efficiency. We estimate this measure on the DJIA daily index from 1962 to 1986 and draw implications for the optimal behaviour of certain classes of investors. It is also shown that the structure of technical trading rules commonly used is consistent with utility maximisation for risk neutral agents and in a myopic sense even for risk-averse agents.